Why Conn's, MeadWestvaco, and Ariad Pharmaceuticals Jumped Today
Monday featured continuing gains for the stock market, as both the Dow and the S&P 500 made small advances that nevertheless represented new all-time record closing highs for both indexes. Stocks generally managed to overcome fears about the health of the manufacturing and construction sectors, with investors disagreeing about whether the economy is likely to keep rebounding even after years of slow but steady progress. Even with the conservative tone among investors, though, Conn's , MeadWestvaco , and Ariad Pharmaceuticals didn't hold back, all posting sizable gains in today's session.
Conn's gained 7% after the electronics and appliance retailer reported earnings this morning. Net income at Conn's hit all-time highs, with a huge 15.6% jump in same-store sales boosting overall revenue by nearly 34%. Higher margins and improved delinquency rates point to a healthier customer base for Conn's, reversing anxiety from past quarters that extending credit directly to its customers could prove troublesome for Conn's. With better than 20% comps in furniture and mattress, home appliances, and home-office products, Conn's gave investors the strong quarter they'd hoped to see.
MeadWestvaco rose 6%, as activist hedge fund investors at Starboard Value made their case for change at the packaging company. Starboard disclosed that it had acquired a 5.6% stake in MeadWestvaco and suggested that the stock was a huge bargain, arguing that inefficiencies in the business operations of the company warranted exploring measures like spinoffs and cost-cutting measures to unlock more value. In response, MeadWestvaco said it would consider the suggestions, although it also defended its own past measures to enhance shareholder value through strategic sales, cost reductions, and dividends and stock buybacks. In today's active M&A environment, MeadWestvaco can expect further back-and-forth from Starboard about the company's future.
Ariad Pharmaceuticals gained 7.5% after the biotech company revealed favorable study data from its phase 2 trial of cancer drug Iclusig on patients with certain types of gastrointestinal tumors. In the long run, though, the success of Iclusig will depend on whether worries about its safety will continue to limit its blockbuster potential. Already, Ariad has had to accept a new warning label in order to get Iclusig back on the market to treat leukemia, for which it already has FDA approval. Until further safety results can confirm or deny Iclusig's effects on patient health, it'll be hard to take Ariad's gains without a big grain of salt.
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